Loews Hits the Highs

After dismal results in 1998 and 1999, Loews (LTR ) now appears to be in the right businesses at the right time. Its huge stakes in insurance, tobacco, and offshore oil-and-gas drilling have turned out to be godsends: They have sent Loews' sales and profits to levels exceeding expectations. "Once regarded by the Street as a private preserve of the Tisch family, Loews has emerged as a triple-crown value winner," says Robert Lyon, president of Institutional Capital, which holds 6 million shares, or 3.5%, of Loews. The Tisch family owns about 50%. CEO James Tisch, notes Lyon, has become more "communicative" about Loews' strategy.

The stock streaked from 44 in mid-January to 72 four months later, before easing to 68 on June 6. It trades at a price-earnings ratio of 10.5 on estimated 2001 earnings. Lyon argues that Loews deserves a higher multiple. The stock "very conservatively is worth 95," he says.

On a sum-of-the-parts valuation, Lyon estimates Loews' worth at 100 a share: Lyon values Loews' 87% stake in insurer CNA Financial at 30 a share in Loews stock. Loews also owns 53% of Diamond Offshore Drilling, valued at 15. And Loews' Lorillard Tobacco unit is valued at 45, based on a 10 multiple on estimated 2002 earnings of $4.50 a share. With cash of $10 a share, total value adds up to 100. This doesn't include holdings in Bulova and Loews Hotels. Lyon sees Loews earning $8.33 a share in 2002, up from an estimated $6.43 in 2001.

Marc Cohen of Goldman Sachs, who is also high on Loews, says Lorillard has been posting solid income growth, and CNA continues to improve margins.

By Gene G. Marcial

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